FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Citi Identifies The Biggest Investment Opportunity In The Energy Space (Business Insider)
Citi’s equity strategist Kingsmill Bond and his team argue that the gas revolution is impacting a series of sectors and countries around the world and thinks the “gas on oil arbitrage” presents a huge investment opportunity.
“The difference between the gas price in [North America] and the oil price is the largest of any of the arbitrage opportunities, but of course the hardest one to arbitrage. However, we believe that arbitrage opportunities of this size are usually exploited, especially in a market which like the US is both large and open, and that the coming years will see a determined attempt to replace oil with gas in the transport sector.”
Ed Yardeni Thinks The U.S. Stock Market Rally Deserves Respect (Financial Times)
The current U.S. bull market “has been a series of powerful relief rallies following severe corrections triggered by ‘endgame’ anxiety attacks,” according to Ed Yardeni, president of Yardeni Research.
Despite all the doom and gloom about the fiscal cliff, Europe’s debt crisis and the slowdown in China, he writes that the American economy has been extremely resilient and its technology revolution will spark innovation in various fields like energy, healthcare, education and so on. He expects the bull market to continue and sees more relief rallies once the fiscal cliff is resolved.
Investors Are Increasingly Turning To Emerging-Market Balanced Funds (Wall Street Journal)
Risk averse investors have turned their attention to a small group of emerging-market balanced mutual funds that offer low volatility. These funds have a stock and bond component.
Emerging markets are expected to see strong inflows again in 2013. And asset managers plan to allocate 38 per cent of international and global product plans to emerging market strategies over the next 12 months, according to a survey by Cerulli Associates.
“What i would tell you to buy is not a stock that’s going up or a future or a commodity or whatever else it might be or selling show. I’d say own the entire U.S. stock market. or if you wish, with some seasoning from the emerging markets or the developed markets of the world.
Own the market, if you will because that way you know you will capture almost all the market’s return. You will not capture the market’s return if you trade with one another because of that hump taken out of your capital by wall street, the great croupiers of America if you will.”
John Mauldin Has ‘A Happy Solution’ To The Peak Oil Problem (Mauldin Economics)
The U.S. spends more on energy while using less of it widening its trade deficit. John Mauldin writes that the U.S. isn’t running out of oil, it’s just running out of cheap oil but there are alternatives. He does however call for opening up land for drilling:
“But in the meantime, we should open up public lands for commercial drilling. And we should do it for a price. Texas finances a great deal of its higher education from oil and gas royalties for wells on state land. US government land should be used to produce revenue as well. …Not only will increased drilling produce needed revenue from royalties and taxes, it will create jobs and allow the possibility of eliminating the trade deficit. What a happy solution! And compared to healthcare, this should be easy!”
Photo: Mauldin Economics
Manhattan Judge Ruling Offers Another Blow To The MBS Industry (Thomson Reuters)
The mortgage-backed security (MBS) industry has been delivered a second blow in New York. On Friday, U.S. District Judge Katherine Forrest allowed a Chicago fund to continue its class action suit against Bank of America and U.S. Bancorp, trustees for Washington Mutual’s MBS.
This follows an April ruling by U.S. District Judge William Pauley of Manhattan, who ruled that mortgage-backed certificates are debt, not equity and are “subject to the federal Trust Indenture Act of 1939 (TIA), which imposes duties on bond trustees”. The MBS industry sees these securities as equities and is unhappy that trustees are burdened with “liability beyond their minimal duties in MBS contracts”. For now the rulings haven’t brought more TIA lawsuits and the MBS industry still has legroom since certain aspects of the suit haven’t been addressed by Forrest yet.